What You Need to Know About Exempt vs. Nonexempt Employees

In order to be an exempt employee in California, an employee must meet three specific requirements stated by the California Labor Code 515. Here is what you need to know about CA Labor Code 515: Exempt vs. Nonexempt Employees.

In order to qualify as exempt by the California Labor Code, an employee must be making at least twice as much as California’s minimum wage for full-time employment, have duties of the administrative, executive, or professional sort, and tasks that require the use of their own discretion and independent judgment. If an employee is able to meet all three of these requirements, they will be classified as exempt from the overtime, minimum wage, and rest break requirements stated by the California Labor Code.

How to Qualify as Nonexempt Employee

In order to be classified as a nonexempt employee in California, an individual must not qualify for the three specific categories of exemption listed above and as defined by the CA Labor Code 515. Nonexempt employees are therefore defined as:

  • An employee who does not make at least twice California’s minimum wage.
  • An employee whose duties do not require the use of their own independent judgment to complete their activities in the workforce.
  • An employee who does not work in administrative or executive decision-making.

What are the Rights of a Nonexempt Employee?

Nonexempt employees are entitled to unique rights by California law. It is important for nonexempt employees to know they have rights to:

  • Be paid the minimum wage as defined by the state. (As of January 2021, California Labor Code 118.12 declared the minimum wage for employees who work for an employer with fewer than 25 employees is $13.00 per hour and $14.00 per hour for those who work for an employer who has more than 25 employees).
  • Overtime pay of at least one-and-one-half times their regular hourly wage for each hour worked in excess of 40 during one workweek.
    • Additionally, California’s specific overtime pay law requires the payment of one-and-one-half times an employee’s hourly wage for all hours worked in excess of 8 in one single workday, all hours worked in excess of 40 during one workweek, and the first 8 hours worked on the seventh consecutive day of work in the workweek.
    • Furthermore, California law requires nonexempt employees to be paid twice their hourly rate in all cases where these employees have worked in excess of 12 in a single workday and all hours worked in excess of 8 on the seventh consecutive day of work in the workweek.
  • California Labor Code Section 512 defines an exempt employee’s rights to a designated 30 minute meal period after no more than five hours of work as well as the right to a paid 10-minute rest break during the middle of each 4-hour work period,
    • If either break is not provided to the employee, the employer must pay one additional hour of regular rate pay for each workday that the rest period is not provided (protected by the California Labor Code Section 226.7).

What Happens if an Employee is Misclassified for Exemption?

California law requires that an employee must “plainly and unmistakably” meet the standard of exemption in order to be classified as such. If the employee does not, then they should be classified as nonexempt.

The misclassification of an employee falls on the hands of the employer, and the employer can face severe consequences from this mistake. Some penalties for this Labor Code violation are listed by not limited to:

  • Failure to correctly pay their employees for overtime may result in financial compensation from the employer
    • An employer’s failure to justly pay their employee for their overtime can result in a quick accumulation of back-pay. Additionally, the employer can be found responsible for legal costs and attorney fees that their employee may have sustained while working this overtime and other penalties up to $200 per pay period for which the overtime laws were violated.
  • Failure to provide meal and rest breaks that may result in financial compensation by the employer
  • Failure to correctly keep pay stub records
    • This could result in the employer paying the employee a penalty which can be mounted from the number of violation-related pay periods.
    • The first pay stub violation is a $50 penalty, then every violation after is $100 and a lot to $4,000 owed to the employee.

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If you or a loved one has any more questions about CA Labor Code 515: Exempt vs. Nonexempt Employees, contact us. Get your free consultation with one of our California Employment Attorneys today!